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Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

Note: Subscribers should reference the paywall material here for stocks that should give a good risk/reward scenario for bearish trades.
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Donald Trump's recent Tweet discusses how Russia has gotten stronger at the behest of President Obama.
For eight years Russia "ran over" President Obama, got stronger and stronger, picked-off Crimea and…

And the banks that need to raise capital are...

I am now releasing the additional calculated capital requirements for several banks, with the full set of calculations available for download for free registered users. I am releasing my proprietary work to demonstrate to those who do not currently subscribe to BoomBustBlog the depth and breadth of this site's capabilities.

The Methodology Used

As stated in my original release of the Sun Trust Stress Test Analysis,I don't necessarily agree with the methodology and assumptions of the government's version of the stress test. For one, they don't risk weight earnings, only assets. Some of the investment banking operations take significant risks to generate earnings (see "Goldman Sachs Banking Secrets Mr. Geithner May Not Share With You!), and these actions pose systemic risk. In addition, the bar is too low to be considered truly stressful (eg. 8.4% average unemployment as a base case in an 8.5% unemployment environment, trending upwards). I have rectified the problem of floating government targets and expectations by creating a scenario analysis that covers multiple assumptions, thus the readers can decide for themselves which set of assumptions to use in order to arrive at what they feel would be the government's (or the most realistic) conclusion.

The following is a summary of my simulated government stress tests based upon the white paper released in the latter part of April 2009. See The Supervisory Capital Assessment Program: Design and Implementation 2009-04-30 02:16:44 286.90 Kb and Bank of Finland Recessionary Stress Testing Methodology 2009-04-30 02:18:39 306.64 Kb for methodology. For my personal accounts, I am assuming a 4% bar for Tangible Common Equity and a 6% bar for Tier One Capital. The actual bars have not been released publicly, to my knowledge. It has been stated in the media and dated government documents that the base case government estimates for unemployment was 8.4%. As previously mentioned, we believe that to be unrealistic (given that the latest government figures show 8.5% unemployment and trending upwards), hence we have used the more stringent RGE Monitor macro assumptions for the base case scenario and have reserved what we perceive as the government's stated parameters as the optimistic scenario.

Please be aware that these are illustrative analyses only, and we are not privy to the same access and information that may have went into the government's analysis of these companies. In addition, the government may have wavered from the stated implementation in the whitepaper released above. All in all, I believe this to be a fairly accurate representation of what one could expect from the government in the upcoming days.

The Scenario Analysis Summary for PNC Bank

Capital to be Raised

Assuming the government requires a 4% minimum tangible equity capital ratio, we foresee PNC being in need of roughly $3.25 billion of additional capital causing approximately 18% in dilution among existing equity investors as of the closing price of the 1st of this month.

The Scenario Analysis Summary for Sun Trust Bank

Assuming the government requires a 4% minimum tangible equity capital ratio, we foresee Sun Trust being in need of roughly $1.5 billion of additional capital causing approximately 31.7% in dilution among existing equity investors, as of the closing price of the first of this month.

I suggest everybody read up on how we got here. I started taking defensive action in 2004, and implemented my offensive actions 2007 - right around the time this blog was started. Read my blog by blow analysis...